Mr. Webb: I am grateful to the Minister for giving way. She said the Government intend to preserve passporting for those on income support. Will that include people who floated off income support? Given the way that such matters are split, under the present system, income support would remain subject to passporting. Is that what the Government is trying achieve? Would a person who is entitled to income support under the present system still receive 100 per cent. housing benefit and the passports, regardless of the mechanism by which they receive money under the new system?

Dawn Primarolo: I do not wish to mislead the Committee, but nor do I want to put doubt in the minds of hon. Gentlemen about our intention. We want to ensure that the appropriate packages of support are provided for those families in greatest need and for families that are eligible for them. To achieve that, we have to discuss the issues with other Government Departments. For example, the Department for Education and Skills has proposed an amendment to the Education Bill to allow an entitlement for free school meals to be attached to appropriate criteria within the new tax credit. That is under discussion. It is a highly complex matter and we shall have the opportunity to return to it in Committee and during later stages of the Bill. At present, the Government expect to be able to give a clear explanation before we finish our proceedings in Committee, as hon. Members discussing the Bill on the Floor of the House and those the other place will need to know such details.

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I have tried to deal with these complex issues in as straightforward a manner as I can. If amendments Nos. 1 and 2 are not withdrawn, I shall ask the Committee to oppose them. Amendment No. 1 would undermine the principle of there being a continuous stream to the family. I hope that I have clarified how that will work and that I have demonstrated that there will be a suitable transition, particularly for the child dependency increases.

Passporting is being addressed. Obviously the Committee will return to the matter, and I hope to be in the position to give some answers. However, I cannot make any promises at the moment. People think that Treasury Ministers are all-powerful, but we have to discuss and negotiate with other Departments. It would be improper for me to say something now without having made it clear that my colleagues in other Departments support my views. I have explained the position as delicately as I can. I hope that the Committee considers that I have been as helpful as possible so far and that the hon. Gentleman will withdraw the amendment.

Mr. Webb: I am grateful to the Minister for the clarification that she was able to give. She said that the precedent in respect of passporting when a benefit system changes was the use of a cash sum to replace a passport to benefit. I hope that the Government are not about to replace benefits with cash sums, whenever possible. For example, I hope that a cash sum will not be given instead of free school meals. I wish to place on record my concern if the Government were to go down that route.

Amendment No. 1 has enabled the Committee to probe into the matter, so I shall not pursue it. The background to amendment No. 2 still worries me, however, because the Minister has not said that there will not be families who will worse off as a result of the abolition of child dependency increases. I accept her point about transition, but because of the abolition of increases under subsection (3)(e), new claimants will not receive additions to their capacity benefit nor full recompense. They will be worse off and will set back the Government's goal of reducing child poverty. I still consider that amendment No. 2 raises some important issues.

Mr. Flight: I thank the Minister for her response to amendment No. 1, with which we are satisfied. We are pleased to note the Government's conversion to our argument to pay benefits to the carer.

I am not satisfied with hon. Lady's response to amendment No. 2. I refer first to a legal point. The Government said in the regulatory impact assessment to the Bill that they would continue the benefits under clause 1(3)(e) to those who receive them at present. However, those benefits are to be abolished by the Bill, so how can people legally continue to receive benefits that have been abolished?

Secondly—I echo the comments of my hon. Friend the Member for Hertsmere—the Minister said that, unless the incomes of new claimants are low enough to qualify for means-tested benefits, those just above that level will be £11.35 lighter. If not, will the Minister

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make it clear that the Government intend that people will not be worse off under the complex new arrangements?

On passporting, I confess that I was not fully clear about what the Paymaster General was saying. However, it seemed that the same point obtained—for those who are on income support, there would be no change in passported benefits, but if their income was not low enough, they might be worse off. Whether or not we press amendment No. 2 to a vote depends on a clear understanding as to whether people will be worse off under the new arrangements in relation to CDIs and passporting.

Dawn Primarolo: In response to the hon. Member for Northavon, I was not referring to replacing benefit with cash. As working families tax credit is more generous, I was commenting on the fact that, instead of just flagging up that those in receipt of it will be passported on to other benefits, we set a cash point—£12,000, I think, although I cannot remember the precise figure. That ensured that everybody who was passported remained passported if they had had an extra gain, but not if their income level was such that that would be inappropriate.

On the points made by the hon. Member for Arundel and South Downs, I explained that, in relation to those who are already in receipt of benefit, with the exception of the two benefits that I identified, the process that has been going on since 1992 will continue: provision will reduce as child benefit increases. On new claims from 2003—this is subject to decisions on rates—we would expect most families who were previously eligible for CDI to receive a more substantial tax credit award, with the exception of families who are already enjoying relatively high incomes, or those who are living overseas. That caveat is working its way through the system.

On replacement of CDIs, the child tax credit will become available to many families who do not fulfil the qualification conditions for income support or JSA, or, currently, for working families tax credit. That is a further boost. The general extension will therefore benefit many families who are currently receiving non-means-tested benefits. Tax credit rates will be determined by the Budget process, and, within those constraints, I am trying to give the Committee the strongest steer that I can.

The final point made by the hon. Member for Arundel and South Downs was on the transitional arrangement. I understand the legal point about whether it will work, but the regulations will spell out the way in which it will operate. I am advised confidently that that is correct, and that we can continue with the provisions. I therefore ask the Committee to oppose the amendments if they are pressed to the vote.

Mr. Flight: I repeat that we are satisfied regarding amendment No. 1. On amendment No. 2, I am sure that the Minister said that although many people will be better off, some will lose out and some will lose

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altogether. If that is the case, the amendment should be pressed.

I forget the technicalities of the procedure. May we vote on amendment No. 2 but not amendment No. 1?

The Chairman: The hon. Gentleman may forget the technicalities, but the Chairman cannot. May I guide the Committee? If the hon. Gentleman wishes to withdraw amendment No. 1 and press amendment No. 2, I will allow a vote on amendment No. 2. However, he must withdraw amendment No. 1.

Clause 2

Functions of board

As the Committee is aware, the clause brings the management of the new tax credits under the Inland Revenue and confers the same management discretion that the Inland Revenue has on other matters. Does that mean that the Inland Revenue will have greater discretion generally than the Department for Work and Pensions with respect to social security benefits?

The real point addressed by amendment No. 3 is that the primary objective of the arrangement is to cook the nation's accounting books. In the back of the Bill's explanatory notes, it is pointed out that a further £4 billion of the existing child-related expenditure and jobseeker's allowance expenditure of the Department for Work and Pensions will be transferred to be booked as a reduction in tax revenue rather than expenditure. If benefit levels are as anticipated to ensure that nobody is worse off, there will be a further £2.8 billion of expenditure. That will bring the total welfare expenditure that is netted of tax revenues rather than booked as expenditure to £15 billion. That is a substantial distortion of national accounting.

Will the national accounts—the Red Book—show that expenditure clearly, or will it appear as only netted of tax revenue? How did the Government satisfy themselves that the arrangements are not in

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breach of section 95 of the European standards of accounting?

The Minister responded to an amendment tabled by the Liberal Democrats to say that one particular benefit definitely will be cast as a family benefit. If the Government argue that we are discussing tax measures rather than welfare measures, how can they have their cake and eat it on the European Union requirements?